The process of hydraulic fracturing just sounds controversial.  Fracking, as it’s often called, creates or widens existing fractures in rock layers by injecting a mixture of water (which typically makes up about 98-99% of the mixture), proppants, and other chemicals into a rock bed.  There are usually a series of injections, each slightly different, that occur at high pressures.  When all is said and done, the well created by the process is flushed with water.  The goal of fracturing is to release petroleum and natural gas from subterranean reservoirs that lack the necessary environmental factors amenable to normal extraction operations.  Sound complicated?  It is.

While hydraulic fracturing has been a topic of discussion on the LexBlog Network for quite some time, a few new developments have thrust the industry back into the spotlight. On Tuesday, April 17th, a post from Keith Hall, an attorney with Stone Pigman, caught my eye.  Entitled “Hydraulic Fracturing and Earthquakes: British Government Releases Report”, it was hard to miss.  The study, conducted by a team of independent researches hired by the UK’s Department of Energy & Climate Change (DECC), showed a correlation between a hydraulic fracturing operation and recent seismic activity in the area.

With so many different variables, and so much at stake, it’s nice to know that there are researchers, with credentials that would make any mother blush, whose purpose is to investigate the potential environmental impact of fracking.  The following is an excerpt from Mr. Hall’s post on the Oil & Gas Law Brief with more details:

“The report, prepared for the Department of Energy and Climate Change, states that hydraulic operations by Caudrilla Resources likely caused the two small earthquakes, which had magnitudes 2.3 and 1.5, but that measures can be taken to prevent a recurrence of such “induced seismic activity” in the future. The report stated that hydraulic fracturing should be allowed to proceed in the area, conditioned on the use of additional monitoring equipment.”

The report goes on to discuss the “unusual combination of factors” that brought about the seismic activity, and what steps could help future operations from running into similar problems.  Again, from Mr. Hall’s post:

“The newly-released report, dated April 2012, states that “it is not possible to state categorically that no further earthquakes will be experienced” if a “nearby” well is fractured because knowledge about the underground fault system in that area is “poor.”  The new report stated, however, that the lack of information regarding faulting in the area possibly could be corrected by using 3-D seismic mapping.  The new report also concluded that it is unlikely that any additional earthquakes large enough to cause structural damage will occur even if fracturing is resumed in the area.”

As the report states, it’s feasible to avoid such incidents, but how easy is it to implement preventative measures?  Lynne Freeman and Laura Riddeck, two lawyers with significant experience in energy and natural resource issues with Reed Smith, point out on the firm’s blog, Environmental Law Resource, institutionalizing the changes as advised by the DECC report could dramatically increase the cost of each hydraulically fractured well.  Here’s more on that, and what lies ahead for the DECC report:

“However, implementing these recommendations is likely to add significantly to the cost of drilling operations. Some experts estimate it could be more than £100,000; others have suggested it could be many times that for each well. This may have a bearing.

The report is now open for a six week consultation period, with the DECC issuing a firm set of regulations after that. It seems likely that the government will follow the DECC’s recommendations in the report, and Cuadrilla will be able to resume its exploration in Lancashire in a matter of months.”

Interestingly, this comes shortly after a different post from Mr. Hall which discussed a study from the United States Geological Survey (USGS) agency. The USGS study concluded that hydraulic fracturing, in of itself, was not to blame for any increase in seismic activity.  The study found the disposal of waste water in fracking and other processes, which rely on injection wells, were the culprit in their research.

While researchers and industry cronies debate the finer points of what’s causing earthquakes, the White House has decided to enter the hotbed of controversy that is fracking.  On April 13th, President Barack Obama issued an executive order creating a federal inter-agency work group to “promote safe, responsible, and efficient development of unconventional domestic natural gas resources.”   This work group would include a number of agencies already working on developing a regulation strategy of processes like hydraulic fracturing.

To better understand what the work group’s purpose was, I found myself over at Joe Koncelik’s Ohio Environmental Law Blog.  Relying on his experience in Ohio’s Environmental Protection Agency, Mr. Koncelik focuses on an array of natural resource and land use issues, with a particular interest in how those conflicts intersect with government regulation.  Now an attorney with Frantz Ward, Mr. Koncelik offered up his analysis of President Obama’s executive order:

“Thus far, the States have really taken the lead in development of new regulations and requirements for fracking.  In my last post I discussed Ohio’s recent legislative proposal. Now, the federal government will attempt to coordinate its efforts regarding oversight and planning associated with unconventional natural gas drilling techniques such as fracking.  The Executive Order creates the inter-agency work group for the following purposes:

  1. Coordinate agency policy activities, ensuring their efficient and effective operation and facilitating cooperation among agencies, as appropriate;
  2. coordinate among agencies the sharing of scientific, environmental, and related technical and economic information;
  3. engage in long-term planning and ensure coordination among the appropriate Federal entities with respect to such issues as research, natural resource assessment, and the development of infrastructure;
  4. promote interagency communication with stakeholders; and
  5. consult with other agencies and offices as appropriate.”

However, Joe wasn’t completely sold on the efficacy of the inter-agency approach:

“In my experience working with such federal inter-agency workgroups associated with the Great Lakes, federal agencies were reluctant to give up their own turf.  Unless the Administration takes an active role in working group it seems very unlikely the agencies, on their own, will coordinate their regulatory efforts.”

With the President, USGS, and British scientists throwing in their two cents, it only makes sense that the United States Environmental Protection Agency (EPA) would jump into the fray.  On April 17, the EPA issued a final set of rules regulating air emission standards at hydralically fractured wells.  James Pardo and Barndon Barnes, two lawyers with McDermott Will & Emery, provided a breakdown of the rules on the firm’s Energy Business Law blog:

“The U.S. Environmental Protection Agency (EPA) released final regulations on April 17 to reduce certain emissions at hydraulically fractured wells by 95 percent. The rule, a product of a February 2010 consent decree with WildEarth Guardians and the San Juan Citizens Alliance, adds New Source Performance Standards (NSPS) and amends existing National Emissions Standards for Hazardous Air Pollutants (NESHAPS) for the oil and gas industry.”

The standards, which include provisions for “green completion”, are detailed in two sections by Mr. Pardo and Mr. Barnes.  The first section looks at the New Source Performance Standards:

“In total, EPA estimates that the rule will result in reductions of 11,000 tons of Hazardous Air Pollutants (HAPs), 190,000 tons of VOCs, and 1 million tons of methane, with a net benefit of $15 million as a result of the increased profit from captured methane sales. “

The second section details the NESHAPS standards:

“EPA estimates that the final NESHAPS amendment will cost industry $3.5 million to implement and will remove 670 tons of HAPs, 1,200 tons of VOCs, and 420 tons of methane.”

As mentioned, an important element of the EPA standards are the provisions mentioning green completion.  Green completion is the process of using equipment to capture gas and other particulate that occurs during hydraulic fracturing flowback.  Typically, the gas and condensate would escape into the air, but by capturing it, the gas can be used and refined.  Jason Yearout of Baker Hostetler gives his thoughts on this section of the EPA’s rules on the firm’s Utica Marcellus Shale Monitor blog:

“A key component of the revised NSPS for VOCs involves the use of a process – known as a “reduced emissions completion” or “green completion” – to capture natural gas that currently escapes to the air. Some states already require such emission capture processes. But the final rule allows oil & gas sources until January 1, 2015 to conduct green completions, using a phased approach to allow sufficient time for cost-effective control equipment and trained operators to become broadly available. Several public comments on the proposed rules, including those by the American Petroleum Institute, indicated that these controls are not sufficiently available currently. Until 2015, the final rule requires fractured and refractured wells to reduce their VOC emissions by 95 percent through combustion devices (flares). In addition, the final rule exempts entirely from the green completion requirements certain types of exploratory (“wildcat”) wells and low-pressure wells.”

Green completion, injection wells, inter-agency work groups; overall, a very busy week for anyone involved in hydraulic fracturing.  With so much attention being paid to recent developments in employment law (the Brinker v. Superior Court decision, NLRB’s posting rule debacle, and a verdict in Christopher v. SmithKline), it’s no wonder the news coming from the hydraulic fracturing and natural gas industries is flying under the radar.  However, given the potential (and incredibly direct) impact of fracking, increased oversight and discussion is something we should all welcome.  While I can’t speak to the validity of any scientific study, it almost goes without saying that any process where earthquakes are considered a “risk” should be treated with caution and respect.

For more of the LexBlog Network’s coverage on hydraulic fracturing, check out our “library” of curated posts on the subject.